Asian shares mixed as greenback, US Treasury yields rise on Fed

Big 5

Major indexes in Asia were mostly lower on Thursday after the dollar and U.S. Treasury yields spiked following big news out of the Federal Reserve.

Japan’s Nikkei 225 rose 0.42 percent, as automakers and most financials notched gains. Oil stocks largely traded higher.

Across the Korean Strait, the Kospi edged down 0.03 percent, but traded above session lows.

Down Under, the S&P/ASX 200 lost 0.87 percent, with broad-based losses across most sub-indexes offsetting gains in energy stocks.

Greater China markets were mostly flat. The Hang Seng Index reversed losses to climb 0.1 percent, while mainland markets were mixed. The Shanghai Composite rose 0.21 percent and the Shenzhen Composite inched lower by 0.215 percent.

Malaysia and Indonesia markets are closed for holidays. The Fed announced Wednesday it would start winding down its $4.5 trillion balance sheet in October. While the Fed left interest rates unchanged, as was widely expected, it indicated that one additional rate hike was probable this year.

The central bank kept its forecast for interest rates in 2017 and 2018, but lowered its expectation for the number of rate hikes between now and 2019 by one.

“The lack of movement in the dot [plot] signals that the committee is still comfortable that the recent dip in inflation is a blip,” said Rob Carnell, Asia head of research at ING, in a note. The dot plot charts Fed members’ targets for future interest rates.

Yields on the 10-year U.S. Treasury note rose to their highest levels since August 8 on the news. The benchmark 10-year Treasury yield stood at 2.2765 percent on Wednesday after climbing as high as 2.29 percent.

Meanwhile, the two-year Treasury note yielded as high as 1.451 percent, touching its highest levels since 2008.

There were also foreign exchange moves following the announcement. The dollar index, which tracks the greenback against a basket of currencies, held onto most overnight gains to stand at 92.519 at 12:14 ap.m. HK/SIN. Against the Japanese currency, the dollar extended gains to fetch 112.45 yen, after earlier climbing to its highest levels since mid-July.

“The Fed did not surprise, but the underlying signal was more hawkish than markets expected,” said David Plank, head of Australian economics at ANZ, in a note.

Stateside, most indexes closed higher on Wednesday as financial stocks made gains. The Dow Jones industrial average tacked on 0.19 percent, or 41.79 points, to close at 22,412.59.

The Bank of Japan was also in focus after it announced Thursday it would keep monetary policy unchanged. The central bank also remained positive on the country’s economic outlook.

While interest rate targets were held steady, one BOJ member opposed the decision as he said existing steps were not sufficient to achieve the inflation target, Reuters reported.

In corporate news, Japan’s Toshiba said Wednesday it would sell its memory chip unit to a consortium backed by Bain Capital. While Bain had brought SK Hynix in on the deal, Toshiba did not mention the South Korean chip maker in its announcement, Reuters reported. The deal would be worth around 2 trillion yen ($18 billion), Reuters added.

Meanwhile, Western Digital said it would be commencing arbitration against Toshiba through its subsidiaries.

The U.S. data storage company, which is involved in joint ventures with Toshiba, had been part of another group that had attempted to buy the Japanese conglomerate’s flash memory unit. Toshiba stock retreated 1.9 percent by 12:13 p.m. HK/SIN. SK Hynix was up 2.73 percent.

Over in Australia, Commonwealth Bank of Australia announced Thursday that it would sell all of its Australia and New Zealand life insurance business to AIA Group for A$3.8 billion ($3.04 billion). Shares of the bank gave up earlier gains to trade lower by 0.28 percent. Hong Kong-listed AIA edged up 0.33 percent.

In other currencies, the euro continued to track lower against the dollar after falling steeply on the Fed’s Wednesday announcement. The common currency fetched $1.1880 at 12:12 p.m. HK/SIN, a touch below a low of $1.1882 seen in the previous session.

In economic news, New Zealand’s second-quarter GDP rose 0.8 percent. GDP in the first quarter was revised to 0.6 percent from 0.5 percent.

The Philippine and Taiwanese central banks also make rates decisions later in the day.

Meanwhile, Hong Kong CPI is due at 4:30 p.m. HK/SIN.

On the energy front, oil prices were mostly unchanged. Brent crude futures were off 0.14 percent at $56.21 a barrel and U.S. West Texas Intermediate crude traded 0.02 percent above the flat line at $50.70. U.S. crude stockpiles had increased for three weeks in a row as oil production resumed stateside, Reuters reported Wednesday.

Source: CNBC